The Worst Jobs Day Ever

Driven by the COVID-19 shutdown, April marked the greatest job loss in American history. The unemployment rate skyrocketed to 14.7 percent, and employers cut 20.5 million jobs.

Those figures are heart-wrenching. But as awful as they are, they do not fully capture workers’ hardships. To be counted as unemployed, people must be available for work and actively seeking it. With schools closed, job opportunities withering, and social distancing the new norm, many displaced workers don’t satisfy those requirements. Instead, they officially show up as having left the labor force.


From February to April, the labor force shrank by 8 million people. Add that to the more than 17 million increase in unemployment, and 25 million Americans are no longer employed. More than 61 percent of Americans had jobs in February. In April, only 51 percent did, the lowest level since records began in 1948.

In addition, millions of Americans still have jobs but have seen their hours cut. From February to April, the number of people reporting that they work part-time for economic reasons rose by 6.6 million. That spike happened even though part-time workers have lost jobs at a particularly sharp rate. Unemployment among people who usually work part-time rose from 3.7 percent in February to 24.5 percent in April, while unemployment for full-time workers rose from 3.5 percent to 12.9 percent.

Americans from all walks of life are suffering in the great shutdown. But the employment damage is not distributed equally. As often happens in downturns, highly educated workers have fared better than those with less education. Among workers with a college degree, unemployment increased from 1.9 percent in February to 8.4 percent in April. High school graduates with no college education, however, have seen unemployment spike from 3.6 percent to 17.3 percent.

Teenage unemployment is now almost 32 percent, far more than for older workers. Unemployment among Hispanic workers has increased more than for white, black, and Asian workers. Women experienced a larger increase than did men.

We are living through remarkable times. The United States has not experienced unemployment at these levels since the Great Depression. The one bit of good news is that many job losses may be temporary. Indeed, a record 78 percent of unemployed workers report they are on temporary layoff.

Unfortunately, many jobs will be permanently lost. To date, policymakers have rightly focused on economy-wide disaster relief. Keeping families and employers financially afloat is essential for an eventual recovery.

When we start down the path to recovery, policymakers should assess how severe the longer-term damage will be and consider policies that accelerate the return to full employment.

This post originally appeared on the Urban Institute’s Urban Wire blog.

Keynes Was Right. Economists Should Aspire To Be Like Dentists

In a lengthy piece on “The Future of Jobs“, the Economist cites some estimates of the risk that IT will eliminate jobs over the next 20 years:

Bring on the Personal Trainers - Economist

So Keynes was right: Economists should aspire to be like dentists.

P.S. Actual Keynes quote: “If economists could manage to get themselves thought of as humble, competent people on a level with dentists, that would be splendid.”

CEA’s New Weekly Economic Index

The Council of Economic Advisers just released an interesting paper examining the macroeconomic harm from the government shutdown and debt limit brinksmanship. To do so, they created a Weekly Economic Index from data that are released either daily or weekly (and weren’t delayed by the shutdown). These data include measures of consumer sentiment, unemployment claims, retail sales, steel production, and mortgage purchase applications.

The headline result: They estimate that the budget showdown cost about 120,000 jobs by October 12.

Looking ahead, I wonder whether this index might prove useful in identifying future shocks to the economy, whether positive or negative. As the authors note:

In normal times estimating weekly changes in the economy is likely to detract from the focus on the more meaningful longer term trends in the economy which are best measured over a monthly, quarterly, or even yearly basis. But when there is a sharp shift in the economic environment, analyzing high-frequency changes with only a very short lag since they occurred can be very valuable.

P.S. I am pleased to see CEA come down on the right side of the “brinksmanship” vs. “brinkmanship” debate.

After 20 Years, Sweden’s Labor Market Still Hasn’t Recovered

By many accounts, Sweden did a great job managing its financial and fiscal crises in the early 1990s. But more than 20 years onward, its unemployment rate is still higher than before the crisis, as noted in a recent commentary by the Cleveland Fed’s O. Emre Ergungor (ht: Torsten Slok):


And its labor force participation rate is still lower:


Does Sweden’s experience portend similar problems for the United States? Ergungor thinks not. Instead, he attributes this shift to a structural change in Swedish policy that has no direct analog in the United States:

One study of public sector employment policies published in 2008 by Hans-Ulrich Derlien and Guy Peters indicates that for many years, the labor market had been kept artificially tight by government policies that replaced disappearing jobs in failing industries with jobs in the government. The financial crisis was the breaking point of an economic system that had grown increasingly more unstable over a long period of time. It was a watershed event that marked the end of an unsustainable structure and the beginning of a new one. Public sector employment declined from 423,000 in 1985 to 240,000 in 1996 mainly through the privatization of large employers—like the Swedish postal service, the Swedish Telecommunications Administration, and Vattenfall, the electricity enterprise—and it has remained almost flat since then.

With such a large structural change, what came before the crisis may no longer be a reference point for what will come after. Having corrected the root of the problem, the Swedish labor market is now operating at a new equilibrium.

That doesn’t mean smooth sailing for the United States, as he discusses. But it does leave hope that perhaps we do better than Sweden in creating jobs in the wake of a financial crisis.

A Good Jobs Report

Today’s jobs data exceeded expectations. Payrolls expanded by 114,000 in September, in line with expectations, but upward revisions to July and August added another 86,000 jobs, so the overall payroll picture is better than the headline.

The big news, though, is that the unemployment rate fell to 7.8%. That’s big economically and symbolically. Indeed, it’s so big that conspiracy-mongerers are suggesting the BLS cooked the numbers to help President Obama get re-elected. Let there be no doubt: That’s utter nonsense.

Other numbers also indicate an improving job market: the labor force participation rate ticked up to 63.6%, the employment-to-population ratio rose 0.4 percentage points to 58.7%, and the average workweek increased by 0.1 hours. All remain far below healthy levels, but in September they moved in the right direction.

Despite the drop, unemployment and underemployment both remain very high, as well. After peaking at 10% in October 2009, the unemployment rate has declined a bit more than 2 percentage points. The U-6 measure of underemployment, meanwhile, peaked at 17.2% and now stands at 14.7%:

As you may recall, the U-6 measures includes the officially unemployed, marginally attached workers, and those who are working part-time but want full-time work. One anomaly in the September data is that the unemployment rate fell from 8.1% to 7.8%, but the U-6 remained unchanged at 14.7%. Why? Because the number of workers with part-time work who want full-time work spiked up from 8.0 million to 8.6 million.

Has the Government Been Growing or Shrinking? Employment Edition

My recent post on government size prompted several readers to ask a natural follow-up question: how has the government’s role as employer changed over time?

To answer, the following chart shows federal, state, and local employment as a share of overall U.S. payrolls:

In July, governments accounted for 16.5 percent of U.S. employment. That’s down from the 17.7 percent peak in early 2010, when the weak economy, stimulus efforts, and the decennial census all boosted government’s share of employment. And it’s down from the levels of much of the past forty years.

On the other hand, it’s also up from the sub-16 percent level reached back in the go-go days of the late 1990s and early 2000s.

Employment thus tells a similar story to government spending on goods and services: if we set the late 1990s to one side, federal, state, and local governments aren’t large by historical standards; indeed, they are somewhat smaller than over most of the past few decades. And they’ve clearly shrunk, in relative terms, over the past couple of years. (But, as noted in my earlier post, overall government spending has grown because of the increase in transfer programs.)

P.S. Like my previous chart on government spending, this one focuses on the size of government relative to the rest of the economy (here measured by nonfarm payroll employment). Over at the Brookings Institution’s Hamilton Project, Michael Greenstone and Adam Looney find a more severe drop in government employment than does my chart. The reason is that they focus on government employment as a share of the population, while my chart compares it to overall employment. That’s an important distinction given the dramatic decline in employment, relative to the population, in recent years. 

P.P.S. As Ernie Tedeschi notes, this measure doesn’t capture government contractors. So any change in the mix of private contractors vs. direct employees will affect the ratio. This is another reason why focusing on spending metrics may be better than employment figures.

Weak Employment in One Chart

Another weak jobs report with payrolls up only 80,000, unemployment stuck at 8.2 percent, and underemployment ticking up to 14.9 percent.

But the real news continues to be how far employment has fallen. As recently as 2006, more than 63 percent of adults had a job. Today, that figure is less than 59 percent:

With the exception of the past several years, you’ve got to go back almost three decades to find the last time that so few Americans were employed (as a share of the adult population).

The stunning decline in the employment-to-population ratio (epop to its friends) reflects two related factors. First, the unemployment rate has increased from less than 5 percent to more than 8 percent. That accounts for roughly half the fall in epop. The other half reflects lower labor force participation. Slightly more than 66 percent of adults were in the labor force back them, but now it’s less than 64 percent.

Are Two Economic Clocks Better Than One?

A man with one clock always knows the time. A man with two clocks is never sure.

This week brings the two heavyweights of economic statistics. On Thursday morning we got the latest read on economic growth, and on Friday we learn how the job market fared in May.

Government statisticians and outside commenters usually emphasize a particular headline number in these reports. For the economy as a whole, it’s the annual growth rate of gross domestic product (GDP), which logged in at a mediocre 1.9 percent in the first quarter. For jobs, it’s the number of nonfarm payroll jobs created in the past month (115,000 in April, but that will be revised on Friday morning).

In each case, the government also reports a second measure of essentially the same thing. Jobs day aficionados are familiar with this. The payroll figure comes from a survey of employers, but the Bureau of Labor Statistics also reports results from a survey of people. That provides the other famous job metric, the unemployment rate, and a second count of how many people have a job. The concept isn’t exactly the same as the payroll measure–it includes a broader array of jobs, for example, but doesn’t reflect people holding multiple jobs–but it’s sufficiently similar that it can be an interesting check on the more-quoted payroll figure.

The downside of this extra information, however, is that it can foster confusion. In April, for example, payrolls increased by 115,000, but the household measure of employment fell by 169,000. Did jobs grow or decline in April?

Another, less well-known example happens with the GDP data. The Bureau of Economic Analysis calculates this figure two different ways: by adding up production to get GDP and by adding up incomes to get gross domestic income (GDI). In principle, these should be identical. In practice, they differ because of measurement challenges. As Brad Plummer notes in a piece channeling Wharton economist Justin Wolfers, the two measures tell somewhat different stories about recent economic growth. In Q1, for example, GDI expanded at a respectable 2.7 percent, much faster than the 1.9 percent recorded for GDP. Is the economy doing ok or barely plodding along?

Such confusion is the curse of having two clocks. We can’t be sure which measure to believe. Experts offer good reasons to prefer the payroll figure (e.g., it’s based on a much larger survey) and GDP (e.g., income measurement is difficult for various technical reasons, including capital gains). But there are counterviews as well; for example, at least one paper finds that GDI does a better job of capturing swings in the business cycle.

Despite this confusion, two clocks are better than one. They remind us of the fundamental uncertainty in economic measurement. That uncertainty is often overlooked in the rush to analyze the latest economic data, but it is real. There are limits to what we know about the state of the economy.

In addition, a weighted average of two readings may well provide a better reading than either one alone. If one clock says 11:40 and another says 11:50, for example, you’d probably do well to guess that it’s 11:45. Unless, of course, you have reason to believe that one clock is better than the other.

The same may well be true for GDP and GDI – the truth is likely in the middle. (This is less true with the jobs data; because of the larger sample, I weight the payroll measure much more heavily than the household measure, at least for monthly changes.)

P.S. For more on GDP vs. GDI, see Dean Baker and Binyamin Appelbaum.

Jobs Report – The Soft Side of Mediocre

As expected, today’s jobs data showed a slowing labor market. Payrolls expanded by 115,000 in April, less than hoped or expected. Upward revisions to February and March added another 53,000 jobs, however, so the overall payroll picture is better than the headline. The unemployment rate ticked down to 8.1%, the labor force participation rate slipped to 63.6%, weekly hours were unchanged at 34.5, and hourly earnings increased a measly penny from $23.37 to $23.38.

Put it all together, and this report is on the soft side of mediocre.

Unemployment and underemployment both remain very high, but they’ve been moving in the right direction. After peaking at 10% in October 2009, the unemployment rate has declined by about 2 percentage points. The U-6 measure of underemployment, meanwhile, peaked at 17.2% and now stands at 14.5%:

(The U-6 measures includes the officially unemployed, marginally attached workers, and those who are working part-time but want full-time work.)

Getting Better But a Long Way to Go

Friday’s jobs data confirmed that labor markets are getting better, but slowly. Payrolls expanded by 200,000, the unemployment rate fell again to 8.5%, weekly hours ticked up from 34.3 to 34.4, and hourly earnings rose by 0.2%.

Of course, there is still a long, long way to go. Unemployment and underemployment both remain very high, but they’ve been moving in the right direction. After peaking at 10% in October 2009, the unemployment rate has declined by 1.5 percentage points. The U-6 measure of underemployment, meanwhile, peaked at 17.2% and now stands at 15.2%:

(The U-6 measures includes the officially unemployed, marginally attached workers, and those who are working part-time but want full-time work.)